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T-Mobile grows rapidly, mainly thanks to T-Mobile USA
November 11, 2004;
The main growth driver was T-Mobile USA, which now has more than 16 million customers.

- T-Mobile International again reported double-digit growth in customers and EBITDA for the third quarter, despite changed market conditions.

- The main growth driver was T-Mobile USA, which now has more than 16 million customers

- Upward trend at T-Mobile Deutschland - Focus on sustained growth begins to yield positive effects: substantial improvement of the EBITDA margin

- Growth and efficiency program launched in reaction to changing markets in Europe

- Obermann: "Save for growth is the guiding principle for the coming quarters."

T-Mobile International reported substantially higher earnings for the third quarter of 2004. The company also announced a growth and efficiency program for its majority-owned subsidiaries in Europe. The company increased its revenue by around 9 percent. The strongest growth driver, at 26 percent, was again T-Mobile USA.

At 67.2 million, T-Mobile now has about 16.6 percent more customers than it had in the prior-year quarter and about 1.6 million more customers than it had at the end of the second quarter of 2004. The growth rate has slowed somewhat, due most of all to the more selective customer acquisition approach in Europe. T-Mobile has recently announced that it intends to pursue more “sustained” growth and for this reason it has modified its policy of subsidizing mobile phones.

The net income from ordinary activities was approximately EUR 1.3 billion, or EUR 651 million on an adjusted basis, and was therefore twice as high as the figure for the corresponding prior-year quarter. This increase can be attributed above all to the below-average cost of sales, as well as economies of scale and efficiency gains.

T-Mobile generated EBITDA of approx. EUR 2.8 billion, or approx. EUR 2.2 billion after adjusting for special factors, in the third quarter. The special factors included write-ups of U.S. mobile communications licenses due to changed market valuations, in the amount of EUR 641 million, and expenses of approx. EUR 5 million at T-Mobile Deutschland for Vivento, the personnel service agency of Deutsche Telekom. At 33.4 percent, the adjusted EBITDA margin was nearly 4 percentage points higher than the corresponding prior-year figure.

The turnaround at T-Mobile Deutschland also had a positive impact on the third-quarter results. The recently initiated, broad-based cost savings and efficiency program has begun to yield positive effects. The average monthly revenue per user was EUR 24 in the third quarter, while the adjusted EBITDA margin, at 41.2 percent, exceeded first and second quarter’s figures.

René Obermann, CEO of T-Mobile International, is pleased with the company’s good results, but also warned about an expected rise in competition Europe: "We are experiencing a change in the market models of the mobile telephone industry and therefore we have established the slogan ‘Save for growth’ as our guiding principle for the coming quarters." He continued by saying: "T-Mobile is on the right path by giving preference to qualitative growth over quantitative customer-growth."

The company has responded to the expected market changes with a number of initiatives in the last few months. Thus, a broad-based growth and efficiency program for the five majority-owned subsidiaries in Europe (Austria, Czech Republic, United Kingdom, Netherlands, Germany) will help these companies adjust to the changed conditions. Obermann: "The goal is to focus more strongly on service offers that create lasting value for the customers and the company." Such products include mobile data services as well as intelligent advances in the voice sector. "The success of our Relax rate plan, by which we have signed up more than 1.1 million customers in Germany alone, provides ample evidence that this is the case," Obermann said.

Thomas G. Winkler, CFO of T-Mobile International, also made it very clear that the days of unbridled customer growth in Europe are over: "That calls for new ideas and approaches."

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